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Zahida Manji joined Slaughter and May as a trainee in September 2017, just months after qualifying into the corporate group in September 2019, she was advising on the decommissioning of the UK’s seven advanced gas cooled reactor (AGR) nuclear power stations.

“This was the longest-running deal I have worked on by far, having joined the team as soon as I qualified in September 2019, with the deal concluding in June 2021. The complexity of the arrangements and the broad spectrum of work involved, as well as the strategic importance of the arrangements and the underlying assets (both to our client and to the UK government’s wider nuclear strategy) make this one of the most memorable deals I have worked on to date,” she explains.

Zahida Manji, Slaughter and May
Zahida Manji, Slaughter and May

“The majority of other deals I have worked on have been private M&A transactions. These negotiations were unique in that they related to complex commercial arrangements and relationships that will be in place for many years going forward and involving some very significant liabilities. We were involved in a broad range of both commercial and operational arrangements which were outside of the usual remit of a corporate associate, including the drafting of parliamentary orders for designating nuclear sites, cooperation and information-sharing frameworks and operational manuals. The number of stakeholders and the public interest element, including state aid and value for money considerations also made this deal stand out relative to others that I have worked on.”

Slaughter and May advised EDF Energy (EDF) on the entry into revised arrangements with the UK government and the Nuclear Decommissioning Authority (NDA) to deliver the safe and efficient decommissioning of the AGR nuclear power stations.

EDF Energy acquired the British Energy Group, which owned the UK’s AGR power stations, in 2009. At that time, EDF and the UK government entered into an arrangement in relation to the funding of future decommissioning liabilities associated with those power stations.

Certain aspects of the arrangements have since needed to be updated and clarified to cater for significant changes in circumstances, including, among other things, revised plans for the closure and decommissioning.

Slaughter and May advised the Department for Trade and Industry (now BEIS), on the original arrangements in connection with EDF’s acquisition of the British Energy Group. On this transaction, the firm acted for EDF. In both instances, the firm was appointed in part due to a beneficial working knowledge of the sector and the relevant agreements.

The revised arrangements had to account for several complex regulatory issues relating to the AGR power stations, which were or are nearing the end of their working lives, and each of which had its own set of decommissioning and deconstruction arrangements with significant associated liabilities.

The team was also faced with the challenge of protecting EDF’s commercial interests while reaching an outcome that delivered value for money to the UK taxpayer. Alongside the amendments to the original arrangements, several new agreements intended to enhance the parties’ long-term working relationships and increase the efficiency of the defueling and decommissioning process, with an ultimate benefit to the taxpayer, were negotiated and documented, including a cooperation framework and an information-sharing agreement.

Other challenges stemmed from the length of the negotiations, which spanned over two years, during which the team was required to drive continuous momentum while maintaining optimal outcomes for EDF and all counterparties. EDF is a key player in the UK government’s nuclear strategy, and the success of this transaction has played an important part in the context of EDF’s wider strategy.

The team had to demonstrate professional excellence throughout, particularly due to the complexity of the commercial contracts involved. Throughout the process, the highest levels of clarity and consistency were required, due to the significant value and strategic importance of the underlying assets.

A delicate balancing exercise was required in relation to the sometimes competing interests of the parties and their respective stakeholders, particularly given the public procurement and value for money angles involved with the public sector counterparties.

The transaction involved a broad spectrum of work, including an intricate understanding of aspects of the nuclear sector and the commercial and operational requirements of defueling and decommissioning. There were also highly complex financing arrangements and state aid considerations. The team was required to produce clear but flexible arrangements that will stand the test of time and are futureproofed against several potential eventualities. This ensures that the public interest is safeguarded, and value is delivered for all parties.

The firm was also required to understand the public procurement process and the commercial and governance arrangements surrounding the contracts, as well as the parliamentary process of designating the nuclear sites in accordance with legislation and the NDA’s statutory powers. This was an unusual ask and not within the usual remit of a corporate/commercial lawyer, but the team were able to deliver. The aim of all the work was to achieve an effective interface between BEIS, EDF and the NDA.

Difficulties the team faced included the number of stakeholders involved in this transaction, each with their own unique interests. This, combined with the challenges of remote-working, made for a difficult context, but the team overcame these challenges by maintaining lines of communication into the client and keeping extremely close liaison with the other counterparties. Management tools were used to help drive the transaction forward, including comprehensive workstream trackers.

The outcome was a successful closure of negotiations, and an issuance of parliamentary orders in accordance with the results of the negotiation. All parties agreed that the outcome was an excellent result, which culminated following a strong and thorough process.

The transaction resulted in greater clarity and de-risking for the parties, operational efficiencies and significant value for the UK taxpayer. Given the different priorities and interests of the involved parties, this level of achievement was an remarkable result following a complex transaction spanning a number of years.

The team was led by corporate partner Michael Corbett, with Manji and associate Sarahanne Jackson. Competition partner Lisa Wright and competition associate Shweta Vasani were also key to the Slaughters team.

The output included a new cooperation framework to enable EDF and the NDA to work together and harness one another’s expertise in defueling and decommissioning respectively, alongside an information-sharing agreement to increase efficiency by allowing an enhanced flow of information. The team also produced several manuals, including for the allocation of costs between various categories of liability associated with defueling and decommissioning the AGR power stations, as well as for the setting of cost targets in connection with the incentivisation regime. These are intended to provide long-term clarity over the funding of the relevant liabilities and to encourage forward-planning and risk management in connection with defueling and decommissioning.

The work carried out and views put forward by the Slaughter and May team also resulted in a favourable interpretation/application of certain provisions of the Energy Act 2004, which enabled greater flexibility in the designation of nuclear sites. This may be capable of application to any future designations of nuclear sites and installations.

About Zahida Manji

2019-present: Associate, Slaughter and May

2017-19: Trainee solicitor, Slaughter and May

Who’s Who: the Slaughter and May team

CORPORATE

  • Michael Corbett, partner
  • Sarahanne Jackson, associate
  • Zahida Manji, associateCOMPETITION
  • Lisa Wright, partner
  • Shweta Vasani, associate

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